- In the Union Budget 2021-22, the government proposed a disinvestment target of ₹1.75 lakh crore for this fiscal year.
- Out of the total ₹1.75 lakh crore, ₹1 lakh crore is to come from selling government stake in public sector banks and financial institutions, including 2 PSU banks and one insurance company. About ₹75,000 crore would come as Central Public Sector Enterprises (CPSEs) disinvestment receipts.
- To fast-track the disinvestment policy, the government announced that NITI Aayog would work out on the next list of central public sector companies that would be taken up for strategic disinvestment.
New Disinvestment Policy
- During the budget presentation, the government also outlined its new disinvestment policy.
- According to that, four sectors — Atomic energy, Space and Defence; Transport and Telecommunications; Power, Petroleum, Coal and other minerals; and Banking, Insurance and financial services — would be strategic sectors.
- In strategic sectors, there will be bare minimum presence of the public sector enterprises. The remaining CPSEs in the strategic sectors will be privatised or merged or subsidiarised with other CPSEs or closed. In non-strategic sectors, CPSEs will be privatised, otherwise shall be closed.
Why in News?
- Chief economic advisor Krishnamurthy Subramanian said that the target of mopping up ₹1.75 lakh crore from disinvestments is on track and groundwork is being prepared for the goal.
- The disinvestment plan for this fiscal year includes strategic sale of IDBI Bank, BPCL, Shipping Corp, Container Corporation, Neelachal Ispat Nigam Ltd, among others.
What is Disinvestment?
- Divestment or disinvestment means selling a stake in a company, subsidiary or other investments.
- Governments resort to divestment generally to reduce financial burden due to inefficient public sector undertakings (PSUs) and to improve public finances. It introduces competition and market discipline and helps to depoliticise non-essential services.
What is Strategic disinvestment?
- Strategic disinvestment implies the sale of a substantial portion of the Government shareholding of a central public sector enterprises (CPSE) of up to 50%, or such higher percentage as the competent authority may determine, along with transfer of management control.
- The Department of Investment and Public Asset Management (DIPAM) under the Ministry of Finance is the nodal department for the strategic disinvestment.
- DIPAM and NITI Aayog jointly identify PSUs for strategic disinvestment.